Question 1

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  The firm makes zero economic profit. 
B)  Price equals average total cost. 
C)  Output is not produced at minimum average total cost. 
D)  None of the above is a false statement. 
A)  The firm makes zero economic profit. 
B)  Price equals average total cost. 
C)  Output is not produced at minimum average total cost. 
D)  None of the above is a false statement.

Question 2

In the short run, a firm in a monopolistic competition will produce the amount of output where its

Accepted Answer

A)  marginal revenue equals marginal cost and will set its price according to the demand for that amount of output. 
B)  marginal revenue equals marginal cost and takes the market price as given. 
C)  average revenue equals average cost and will set its price according to the demand for that amount of output. 
D)  average revenue equals its average cost and takes the market price as given. 
A)  marginal revenue equals marginal cost and will set its price according to the demand for that amount of output. 
B)  marginal revenue equals marginal cost and takes the market price as given. 
C)  average revenue equals average cost and will set its price according to the demand for that amount of output. 
D)  average revenue equals its average cost and takes the market price as given.

Question 3

In monopolistic competition, in the long run customers pay a price that is

Accepted Answer

A)  less than the minimum ATC. 
B)  more than the minimum ATC. 
C)  equal to both the minimum ATC and the minimum AVC. 
D)  equal to the minimum ATC, but not equal to the minimum AVC. 
A)  less than the minimum ATC. 
B)  more than the minimum ATC. 
C)  equal to both the minimum ATC and the minimum AVC. 
D)  equal to the minimum ATC, but not equal to the minimum AVC.

Question 4

Monopolistic competition is defined as a type of market structure where

Accepted Answer

A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can earn positive profit in the long run. 
A)  many firms produce the good. 
B)  firms produce a homogeneous good. 
C)  there are barriers to entry. 
D)  firms can earn positive profit in the long run.

Question 5

-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). If Fresh Taste and other firms in the market are currently producing their profit maximizing quantities of cereals, then the market is

Accepted Answer

A)  in both short-run equilibrium and long-run equilibrium. 
B)  in short-run equilibrium but not in long-run equilibrium. 
C)  in long-run equilibrium but not in short-run equilibrium. 
D)  neither in short-run equilibrium nor in long-run equilibrium. 
A)  in both short-run equilibrium and long-run equilibrium. 
B)  in short-run equilibrium but not in long-run equilibrium. 
C)  in long-run equilibrium but not in short-run equilibrium. 
D)  neither in short-run equilibrium nor in long-run equilibrium.

Question 6

Excess capacity and high advertising expenditures are most likely to be encountered in

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  both monopolistic and perfect competition. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  both monopolistic and perfect competition.

Question 7

In the long run, a monopolistically competitive firm's price equals

Accepted Answer

A)  its average total cost and its marginal cost. 
B)  its average total cost but not its marginal cost. 
C)  its marginal cost but not its average total cost. 
D)  neither marginal cost nor its average total cost. 
A)  its average total cost and its marginal cost. 
B)  its average total cost but not its marginal cost. 
C)  its marginal cost but not its average total cost. 
D)  neither marginal cost nor its average total cost.

Question 8

Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

Accepted Answer

A)  product differentiation. 
B)  perfect product competition. 
C)  oligopolistic product competition. 
D)  price taking behavior. 
A)  product differentiation. 
B)  perfect product competition. 
C)  oligopolistic product competition. 
D)  price taking behavior.

Question 9

The Karaoke Channel Online streams professional-grade karaoke for $9.95 a month. Suppose Karaoke Channel Online has a constant marginal cost of $1 per customer and total fixed cost is $20,000. The profit maximizing number of customers is 10,000. Several competitors start to advertise online. Karaoke Channel Online now spends $5,000 a month on advertising and the profit maximizing number of customers increases to 12,000 and the streaming price remains constant. What is Karaoke Channel Online's total profit before the advertising begins?

Accepted Answer

A)  $66,500 
B)  $99,500 
C)  $64,500 
D)  $76,500 
A)  $66,500 
B)  $99,500 
C)  $64,500 
D)  $76,500

Question 10

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm maximizes its profit by

Accepted Answer

A)  producing 8 units at a price of $5 each. 
B)  producing 8 units at a price of $15 each. 
C)  producing 4 units at a price of $20 each. 
D)  producing 12 units at a price of $10 each. 
A)  producing 8 units at a price of $5 each. 
B)  producing 8 units at a price of $15 each. 
C)  producing 4 units at a price of $20 each. 
D)  producing 12 units at a price of $10 each.

Question 11

In the long run, monopolistically competitive firms produce where

Accepted Answer

A)  excess capacity exists. 
B)  the markup is equal to zero. 
C)  the demand curve has shifted so that it intersects the minimum average total cost point. 
D)  average total cost is minimized. 
A)  excess capacity exists. 
B)  the markup is equal to zero. 
C)  the demand curve has shifted so that it intersects the minimum average total cost point. 
D)  average total cost is minimized.

Question 12

Brand names are an example of

Accepted Answer

A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry. 
A)  economies of scale. 
B)  product differentiation. 
C)  oligopoly. 
D)  illegal barriers to entry.

Question 13

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, Gap's economic ________ is ________.

Accepted Answer

A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000 
A)  loss; $8,000 
B)  loss; $13,000 
C)  profit; $7,200 
D)  profit; $13,000

Question 14

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

Accepted Answer

A)  P = MC = ATC 
B)  P = MC = MR 
C)  ATC = MC = MR 
D)  P = ATC 
A)  P = MC = ATC 
B)  P = MC = MR 
C)  ATC = MC = MR 
D)  P = ATC

Question 15

In the long run, monopolistically competitive firms are ________ to perfectly competitive firms because ________.

Accepted Answer

A)  similar; both firms produce at the minimum ATC 
B)  similar; both firms make zero economic profit 
C)  not similar; monopolistically competitive firms set P = MC to maximize profits 
D)  not similar; monopolistically competitive firms can make an economic profit and perfectly competitive firms cannot 
A)  similar; both firms produce at the minimum ATC 
B)  similar; both firms make zero economic profit 
C)  not similar; monopolistically competitive firms set P = MC to maximize profits 
D)  not similar; monopolistically competitive firms can make an economic profit and perfectly competitive firms cannot

Question 16

-In a monopolistically competitive industry, the firms are currently making an economic profit. When this market moves to its long-run equilibrium, the firms' demand curves will have ________ and their economic profit will have ________.

Accepted Answer

A)  shifted leftward; decreased to zero 
B)  shifted leftward; decreased but remain greater than zero 
C)  shifted rightward; decreased to zero 
D)  remained the same; decreased to zero 
A)  shifted leftward; decreased to zero 
B)  shifted leftward; decreased but remain greater than zero 
C)  shifted rightward; decreased to zero 
D)  remained the same; decreased to zero

Question 17

Why are selling costs high in monopolistic competition?

Accepted Answer

In monopolistic competition, there are a

Question 18

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
-In the figure above, what is Gap's economic profit?

Accepted Answer

A)  zero 
B)  $5,000 
C)  -$5,000 
D)  -$1,160 
A)  zero 
B)  $5,000 
C)  -$5,000 
D)  -$1,160

Question 19

Product differentiation

Accepted Answer

A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct. 
A)  is why a monopolistic competitor faces a downward-sloping demand curve. 
B)  means that the monopolistic competitor's product is a close but not a perfect substitute for the products of its competitors. 
C)  enables the monopolistic competitor to compete in product quality. 
D)  All of the above answers are correct.

Question 20

One important difference between monopoly and monopolistic competition is the

Accepted Answer

A)  slope of the demand curve that the firms faces. 
B)  point there are no barriers to entry in monopolistic competition. 
C)  greater restriction of output in monopolistic competition. 
D)  result that the marginal revenue and demand curves are the same for a monopoly. 
A)  slope of the demand curve that the firms faces. 
B)  point there are no barriers to entry in monopolistic competition. 
C)  greater restriction of output in monopolistic competition. 
D)  result that the marginal revenue and demand curves are the same for a monopoly.

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

In the short run, a firm in a monopolistic competition will produce the amount of output where its

In monopolistic competition, in the long run customers pay a price that is

Monopolistic competition is defined as a type of market structure where

Excess capacity and high advertising expenditures are most likely to be encountered in

In the long run, a monopolistically competitive firm's price equals

Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm maximizes its profit by

In the long run, monopolistically competitive firms produce where

Brand names are an example of

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap's economic is .

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

In the long run, monopolistically competitive firms are to perfectly competitive firms because .

-In a monopolistically competitive industry, the firms are currently making an economic profit. When this market moves to its long-run equilibrium, the firms' demand curves will have and their economic profit will have .

Why are selling costs high in monopolistic competition?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, what is Gap's economic profit?

Product differentiation

One important difference between monopoly and monopolistic competition is the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 14: Monopolistic Competition

Which of the following is FALSE regarding the long run for a firm in monopolistic competition?

In the short run, a firm in a monopolistic competition will produce the amount of output where its

In monopolistic competition, in the long run customers pay a price that is

Monopolistic competition is defined as a type of market structure where

Excess capacity and high advertising expenditures are most likely to be encountered in

In the long run, a monopolistically competitive firm's price equals

Brand name aspirin is chemically identical to store brand aspirin. Yet, consumers often prefer the brand name product to the store brand product. This preference is an example of

-The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm maximizes its profit by

In the long run, monopolistically competitive firms produce where

Brand names are an example of

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap's economic ________ is ________.

Which of the following is TRUE regarding the long run for a firm in monopolistic competition?

In the long run, monopolistically competitive firms are ________ to perfectly competitive firms because ________.

-In a monopolistically competitive industry, the firms are currently making an economic profit. When this market moves to its long-run equilibrium, the firms' demand curves will have ________ and their economic profit will have ________.

Why are selling costs high in monopolistic competition?

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, what is Gap's economic profit?

Product differentiation

One important difference between monopoly and monopolistic competition is the

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

The figure shows the demand curve for Gap jackets (D), and Gap's marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). -In the figure above, Gap's economic is .

In the long run, monopolistically competitive firms are to perfectly competitive firms because .

-In a monopolistically competitive industry, the firms are currently making an economic profit. When this market moves to its long-run equilibrium, the firms' demand curves will have and their economic profit will have .